“There are excellent opportunities to unlock value from the many high quality businesses that currently comprise Clariant,” said a spokesman for White Tale, the vehicle they created to buy the stake.

“Unfortunately, we do not believe that the proposed merger with the Huntsman Corporation is one of those options.”

Meister, who is a protege of billionaire investor Carl Icahn, manages assets worth $6 billion with Corvex and took a 5.5 percent stake in communications company Century Inc (CTL.N) earlier this year.

40 North, run by New York real estate investor David Winter and former Bear, Stearns & Company financial analyst David Millstone, held a stake in Clariant before linking with Corvex in their bid to overturn the Huntsman deal. Winter and Millstone are also co-CEOs of roofing maker Standard Industries.

Their gambit is the latest by a U.S.-based activist investor in Europe, with billionaire investor Daniel Loeb’s Third Point last month taking a $3.5 billion stake in Nestle (NESN.S) to pressure the Swiss food giant to boost performance and repurchase shares. Nestle subsequently announced a nearly $21 billion share buyback.

Clariant, which on Tuesday noted the increased investment by Corvex without addressing Corvex’s opposition to the merger, said it has been in contact with the hedge fund since last year when it initially took a stake.

“As with all our shareholders we maintain an open dialogue with them,” a Clariant spokesman said.

Huntsman did not return a phone call seeking comment.

Clariant shares traded 3 percent higher by 1310 GMT.

FRIENDLY MERGER

Clariant and Huntsman in May announced a merger valued at around $20 billion including debt in which Clariant shareholders would hold 52 percent of the combination.

They talked up the friendship between chief executives Hariolf Kottmann and Peter Huntsman as well as prospects for faster growth for the combined company as rationale for “a merger of equals”. Among other things, they expect about $400 million in annual cost synergies.

Keith Meister, founder and chief investment officer at Corvex Management LP., speaks during the Sohn Investment Conference in New York May 4, 2015. REUTERS/Brendan McDermid

The deal, creating a company with about $13 billion in annual sales, had support of German families that own almost 14 percent of Clariant.

The stake at least gives Corvex and 40 North a platform to lobby against the deal or try to flush out an alternative bid.

Some analysts said the merger makes sense, in particular after Huntsman spins off its Venator pigments business in an IPO.

“Huntsman’s portfolio, after the pending Venator spin-off, offers a highly complementary growth portfolio, in our view - complementary in a way that it puts both companies on a sounder, broader footing,” Kepler Cheuvreux’s Christian Faitz said.

NO DATE FOR VOTE

No date has yet been set for shareholders to vote on the merger, Clariant said, but a source familiar with the situation said a meeting would be scheduled only after Huntsman spins off Venator.

The source said a business combination agreement between Clariant and Huntsman is already in place and would be difficult to rewrite.

Still, some investors said the merger always looked like a defensive move designed to protect Clariant or Huntsman from being swallowed up by a larger group.

“We sold our position following the Huntsman announcement,” said a former top-10 investor in Clariant. “The logic for value accretion for Clariant shareholders was questionable, so I do understand where Corvex is coming from.”

Baader Helvea analyst Markus Mayer said a counteroffer was now more likely, citing Germany’s Evonik (EVKn.DE) and Lanxess (LXSG.DE) as having courted Clariant in the past and as companies including BASF (BASFn.DE) that could still be interested in the Swiss company.

“Clariant is an attractive bride,” said Martin Lehmann, of 3V Asset Management AG in Zurich. Clariant is among his fund’s largest holdings. “I hope another interested party steps in and makes an offer,” he said.

40 North’s Winter and Millstone also have been building up Standard Industries, their roofing materials company, including through a $2.1 billion takeover of Germany’s Braas Monier and the $1 billion purchase of Denmark’s Icopal.

Reporting by John Miller and Oliver Hirt in Zurich, Arno Schuetze in Frankfurt and Maiya Keidan and Simon Jessop in London; editing by Jason Neely and Keith Weir